Lean Thinking: It's AboutEfficient Value CreationLearn to match customer needs without waste.

Ron Mascitelli, CMC

Eliminate barriersto theflow ofvalue.

22Target Volume 16, Number 2

The principles of lean thinking can be used as aframework for improvement of both recurringmanufacturing activities and also upstream in

non-recurring processes such as product development.The focus is on efficient value creation.

The first principle is that companies mustclearly define the value of their products as perceived bytheir customers. This means scrutinizing every productcategory for excessive complexity, performance over­shoot, unnecessary features and options, and so on. Thegoal is to deliver products that precisely match the cus­tomer's needs without waste.

The second principle argues that for the firmto deliver value effiCiently, they must first understandthe value stream (see the accompanying box) withinthe company. The value stream is the sequence of activi­ties and process steps that are essential to creating anddelivering a product.

Although it may seem like everything that goes onin a company is part of the value stream, in reality

much effort is wasted on non-value-adding (NVA) tasks.Mapping the organization's value stream enables it tocategorize activities into value-added (VA - those tasksthat transform the product in some measurable way)and NVA (wasted effort that could be eliminated withoutany impact on the customer).

Once the value stream is identified, we then focuson the third principle: Eliminate barriers to the flowof value. These barriers can take the form of largebatches of inventory or capacity bottlenecks in the facto­ry, or it could be in the form of excessive meetings,approvals, documentation, etc. during the productdevelopment process.

After these obstacles have been eliminated, a firmis free to allow its customers to "pull" value, meaningthat all production activities are triggered by realdemand from the marketplace. This fourth principleis illustrated by the pull! JIT production system devel­oped by Toyota Motor Company.

The fifth and final lean principle demandsthat the first four steps be repeated continuously toensure that methods and systems are constantly beingpurged of waste.

Taking Steps Towards a Lean EnterpriseEducation is the first step in moving towards a

lean enterprise. This learning must include all seniormanagement (including the CEO). Lean thinking is anenterprise-wide concept. To be truly effective, it requirescommitment at all levels.

Once the appropriate tools and knowledge are

available to relevant employees, a team can be formedto map out the current-state value stream of the firm.From this "as-is" map, two improvement efforts can belaunched. The first attacks the low-hanging fruit ofwaste through a process often referred to as a "kaizenblitz" in manufacturing, or a "process blitz" forupstream processes. These short-term, intensive effortstarget opportunities for quick-hit improvement andinvolve immediately-implemented solutions.

I would suggest that firms do a quick-hit, blitz­type effort very early in their lean implementation, bothto gain some early successes and to force some focusedthinking on how the lean principles actually apply to aspecific firm's environment. Don't get hung up on thetools, symbols, and methods of value-stream mapping.Adapt the tools to your firm and industry, and chooseicons and mapping methods that make sense to you.Keep it simple and relaxed. Remember, the whole idea isto provide you with insights into waste, not to createadditional structure and bureaucracy.

The second initiative supported by the initial valuestream mapping effort has a longer-term impact. In thiseffort, a team is formed to envision a "future state" map,which is then used to form an extended plan for improve­ment that will align the firm with the concept of leanvalue creation. For example, a future-state improvementplan for a product development might involve transition­ing from a rigid phase/gate structure to a more flexible,continuous-flow process in which information movesfrom task to task on a "just in time" basis.

Consider MetricsLean implementation metrics inClude such tradi­

tional measures as inventory turns, manufacturingcycle time, quality and defects, etc. In addition, newmetrics such as the value-added ratio can be used tocapture the unique perspectives of lean thinking. Thismetric is simply the ratio of time spent on VA activitieswhen compared to the total time spent in creating aproduct or service. The closer this ratio is to one, thebetter the efficiency of an operation. It is not uncom­mon for the ratio to be 1:10 or worse for manufacturingcompanies before instituting lean improvements.

Lean ManUfacturing Extends Into ProductDevelopment

The product development arena provides anexample of lean concepts at work. We are dealing with anon-recurring process that creates value through

manipulation of information. This is in contrast to pro­duction activity focusing on the recurring transforma­tion of physical materials.

Yet there are powerful analogies that can be madereflecting the extension of lean manufacturing into thedomain of product development. For example, function­al departments within a firm can represent an obstacleto the flow of value during product development byenforcing queues for performing discipline-specific tasks(such as electronics design, software development, etc.).This is a form of "time batching" in the sense that eachtask within the project must pass through the queue tobe completed. This is in contrast to the lean best practiceof continuous-flow product development that mandateshigh-priority projects receive immediate action alongtheir critical paths.

One suggestion for applying lean thinking to theearly conceptual stages of product development is toquestion every specification or feature of a proposedproduct using the criterion of the "least discernable dif­ference." The idea is that we only want to include per­formance and features that the customer is willing topay for (that they measurably value). Another way toask this question is to determine if a firm's customerswill pay "one penny more" for a feature a given featureor benefit. One example is the modern VCR. How manyof the features, controls, buttons, etc. in this product areactually worth a penny more to customers? Perhaps abetter question would be, "Wouldn't some simplicity­minded customers be willing to pay more for a simplerproduct (along the lines of the iMac computer)?"

With respect to the process of product develop­ment, there are two lean concepts that enable dramaticreductions in time-to-market and profitability of newproducts. The first is the integrated product team, whichreflects the need for continuous information flow withinthe process. This concept is an extension of traditionalconcurrent engineering to encompass the entire struc­ture of the firm.

Another lean concept is the idea of continuousflow product development. Many firms have implement­ed "phase and gate" product development processes as ameans to enforce concurrency during product design.This is an excellent transitional method, but it canbecome a major barrier to the flow of value if it isenforced rigidly, arbitrarily, and externally. I recom-

continued on p. 26

The productdevelopment

arena provides anexample oflean

concepts at work.

23SecondQuarter 2000

The most importantopportunitiesforlean productdesign occur at thelevel ofproductarchitecture.

26TI1t'up.f Vfl!ump. 1(1 NumhP.t'?

mend that firms soften their gates, reduce their number,and allow the integrated product team to select logicalpoints along their critical path to hold those go/no gomeetings. In this waY,the flow of value is driven inter­nally by the team; rather than externally and rigidly bysenior management.

Prot/uet ArehltBetufB·The benefits of lean thinking are not restricted to

process 1mprovements. Lean principles apply equallywell to the design of products for lean production.Moreover, the leverage gained through applying leandesign principles compounds the improvementsachieved. through lean manufacturing initiatives.

The most important opportunities for lean productdesign occur at the level of product architecture.Products should share common platforms, sub-assem­blies, and individual components to the greatest extentpossible. The ultimate goal is to have the highest per­centage of reused common components possible for var­ious varieties of a given product, as well as acrossmultiple product lines.

One of the concepts supporting lean design ismass customization. It proposes that products bedesigned so that customization is postponed as late aspossible in the manufacturing process. In this way, anentire line of products can be produced on a single inte­grated line, with only the last few steps being specific toindividual customized versions.

Will your organization learn to efficiently deliverthe highest value to your customers through lean prod­uct development and lean manufacturing? Simplicityand competitive strength await those who accept thechallenge.

Ron Mascitelli ispresident ofTechnology Perspectives, a technolo­gy management firm specializing in corporate education pro­grams on product strategy and lean product developmentmethods. He is an instructorfor various AME educational eventsincluding lean supply chain management, lean product devel­opment, and otherprograms.

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